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History Rhymes
By Morgan Christen
CFA, CFP, CDFA, CEO and CIO
Welcome,
Mark Twain once said, "history doesn't repeat itself, but it often rhymes."
Incy wincy spider climbed up the waterspout, down came the rain and washed the spider out, out came the sun and dried up all the rain, and Incy wincy spider climbed up the spout again.
Human nature never changes, just as Incy climbed back up the spout, some investors have forgotten the past and are climbing again.
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Jacob Internet Fund (JAMFX) Launched December 1999
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A classic end to the 2000 internet bubble was the Jacob Internet Fund, launched in December of 2000. This young manager was the talk of the town, he could do no wrong, until the rain came down and washed his profits out.
Remember stocks like Pets.com, Webvan, Boo.com, Worldcom, Global Crossing or Books-A-Million? They are all gone, but wow did they move up (and man did they drop). New paradigm, earnings do not matter, these were game changing companies... until they were not.
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ARK Innovation ETF (ARKK)
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Enter the latest Wall Street darling, Cathie Wood, of the ARK funds. Her funds have been on fire, lucky for her she launched the ARK Innovation fund back in 2014, so she has had a bit of a runway versus Jacob.
But much like Jacob's fund, she is heavy in the latest high-flyers such as Tesla, Zoom and Bitcoin. Will she suffer the same fate? Time will tell if the rain washes Ms. Woods (and those high-flyers) out.
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3 month comparison of Bitcoin versus Gold
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Speaking of Bitcoin... as of this writing, crypto currency has taking a beating. There have been many negatives to wash their growth away. Bitcoin has been touted as a "store of value." Not sure if that is true, as there are now thousands of coins, and they are extremely volatile.
As we spoke of last month, many investors are concerned with inflation. As the chart below may show, Bitcoin has been pulling funds from gold investors for some time. Gold usually spikes when investors are concerned with inflation, but it has not moved, until recently.
Are investors realizing Bitcoin is not a store of value? Are they realizing that gold, while boring, may be the best store of value if you are concerned with inflation? Not sure of the answer yet, but it is a developing story.
Could it be time to initiate a gold hedge? Maybe, but as the chart below shows, stocks perform quite well in a low to rising interest rate world with commodities coming in a strong third.
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Conclusion
The bible talks of false prophets. I have enjoyed listening to all the prophets talk of the latest investment trends. Will crypto change the world? Yes, for sure, but that does not mean you will earn a return.
As a fundamental investor it is impossible to tell what "coin" will win; you simply do not have enough data. Some will do well, but many will fail. These current prophets (and profits) will fade, and fundamentals will prevail (they always do). Though clearly not as artful as "Incy Wincy Spider," please indulge my final thoughts in the form of this rhyme.
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Spinnaker Investment Group is a boutique, family-owned investment advisory firm that helps each investor design, implement and run a portfolio. We work directly with each client to help them realize their financial independence.
© 2021 Spinnaker Investment Group. All Rights Reserved.
Disclosures
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GET IN TOUCH
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info@spinninvest.com
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4100 MacArthur Blvd., Ste 120
Newport Beach, CA 92660
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DISCLOSURES: Past performance is no guarantee of future results, and there is always the risk that an investor may lose money. Diversification neither assures a profit nor guarantees against loss in a declining market. The information contained herein is based on internal research derived from various sources and does not purport to be statements of all material facts relating to the securities mentioned. The information contained herein, while not guaranteed as to the accuracy or completeness, has been obtained from sources we believe to be reliable. Opinions expressed herein are subject to change without notice.
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